Ecosystem not ready for insolvency law: SBI chief Arundhati Bhattacharya
Kolkata: The “ecosystem” for rapid dispute resolution under the Insolvency and Bankruptcy Code is not ready yet, State Bank of India (SBI) chairman Arundhati Bhattacharya said on Tuesday, adding that the country’s biggest lender is not “rushing” to settle its stressed accounts under the new law.
Banks have been asking for a judicial framework for the “orderly resolution” of stressed assets. The sector has got the law it wanted, she said at a press conference in Kolkata, but implementation of the new code will take time.
By ecosystem, Bhattacharya said she meant benches have to be created by the National Company Law Tribunal (NCLT) to deal with dispute resolution. “Next, you have to create information utility, which has still not come,” she said, referring to the creation of a template to deal with nuances such as covenants set for lending and the securities available for settlement.
Also, the country needs more resolution professionals, who, under the new code, are handed control of insolvent companies until a restructuring plan is finalized, according to Bhattacharya. These professionals need to clear a test, get certified and register themselves with NCLT. “The ecosystem has begun to be created... (it) has been created to an extent but not fully (ready yet),” she said.
A leading lawyer in Kolkata said it is “strange” for the SBI chairman to make such a comment as the SBI itself has started to file applications under the new insolvency code.
“It could undermine SBI’s own case of using the code for dispute resolution,” said this person, asking not to be named. “However, this could also mean that SBI is not dragging all its defaulters to NCLT immediately.”
On Monday, the SBI filed at the NCLT’s Kolkata bench its application for the appointment of an interim resolution professional to take control of assets and operations of Electrosteel Steels Ltd, a defaulter, which owes it Rs1,404 crore, according to lawyers for the lender. The firm didn’t oppose the application, and if a resolution professional is appointed, its board will be superseded.
Under the insolvency code, there is “no middle path”, according to the lawyer cited above.
“NCLT either admits your application, which results in the board getting superseded, or it rejects your application altogether,” he said. “Considering the huge volume of stressed assets in the system, it is indeed crucial to have a large pool of resolution professionals,” he added.